I understand that the player won't play files sequentially, and that if an audiobook is divided up into multiple files you have to play them manually? If that's true then the podcast folder doesn't really work for me, and I might as well get an S545 or E series.

I'm not sure where you heard that "the player" won't play files sequentially. Which model are you referring to? If you name files with sequential file names (chapter01.mp3, chapter02.mp3, etc) they will play back in the correct order using Folder mode on an S639 or an S545 (the only two Sony players I have experience with). If you name the ID3 tags correctly you can select your audiobook via Album mode and the files will play in the correct order.

If you put files in the Podcast folder on an S630/S730, you will have to manually select the next file to be played after the previous one ends. In this instance it is better to have long audiobook chapters instead of short ones. Podcasts on the S630/S730 will not continuously play from one file to the next. The S540 series doesn't have any podcast support so if you don't like the podcast features on the S630/S730 then you definitely won't like the S540.

Check out this thread, there is more info on audiobooks and podcasts. If you have any specific questions please ask.

A bookmark function is exactly what we need, but I don't know of any Sony players that have it. It sounds like the S540 series is definitely not for you since it doesn't support podcasts at all and will only remember the position of the last track played. The S630/S730 series actually works ok for audiobooks and podcasts. There are "new" icons on unplayed pocasts, so it's easy to see which audiobook/podcast track you left off (the last track that doesn't say "new" on it's icon. The player will remember the position within the track. Unfortunately you will have to manually select each track to play if it's within the Podcast folder - a limitation of the way Sony implemented podcast support. If your audiobooks are made up of short tracks this will get old real fast. You could always join your short audiobook files into longer tracks. There is freeware software available that will do that without re-encoding your MP3's.